Mr. Jim Gowans reports
DOMINION DIAMOND FILES UPDATED TECHNICAL REPORT FOR THE DIAVIK DIAMOND MINE
Dominion Diamond Corp. filed today an updated technical report under National
Instrument 43-101 for the Diavik diamond mine, with an
effective date of Jan. 31, 2017. The report, entitled "Diavik diamond
mine, Northwest Territories, Canada, NI 43-101 technical report," was prepared by the operator of the Diavik mine,
Diavik Diamond Mines (2012) Inc. (DDMI), a subsidiary of Rio Tinto
PLC, and may be found under the company's profile on SEDAR and on the
company's website.
The report includes an updated mineral reserves and mineral resources
statement and an updated reserves-only life-of-mine plan. The company
has a 40-per-cent interest in the Diavik mine, and Rio Tinto has a 60-per-cent interest
and operates the mine through DDMI. Unless otherwise noted, all
financial information is presented on a 100-per-cent
basis, and references to years are to calendar years. An exchange rate
of $1.33 (Canadian) to $1 (U.S.) was used for costs denominated in U.S. dollars.
Highlights:
- Mine life has been extended to 2025 from 2023 (1).
-
After-tax net present value was approximately $2.6-billion at a 7-per-cent
discount rate, based on the assumptions and analysis contained in the
2017 technical report (2).
- A total of 46.0 million carats were recovered between 2017 and 2025, an increase of
6.3 million carats or 16 per cent, from the previous estimate for the
comparable period (3).
-
Forecast total revenue was approximately $9.0-billion, and total
operating cash flow (4) was approximately $3.7-billion
between 2017 and 2025, an increase of 22 per cent and 32 per cent, respectively, from
the previous estimates for the comparable period (3).
-
Total operating costs between 2017 and 2025 are consistent with the
previous estimate for the comparable period (3), as the
impact of cost escalation and the increase in mine life and
reclamation are offset by efficiency improvements.
- Total capital expenditures between 2017 and 2025 are consistent with
the previous estimate for the comparable period (3), as
lower expected capital expenditures at the A-21 pipe are offset by
higher sustaining capital expenditures related to cost escalation and
the increase in mine life.
"The updated life-of-mine plan for Diavik extends the mine life,
increases carat production, and grows future revenues and cash flows,
while maintaining operating costs and capital expenditures at levels
that are consistent with earlier forecasts," said Jim Gowans, chairman
of the board of directors. "The focus on cost-efficiency improvements
and development of the A-21 pipe, which underpins the mine life
extension, is consistent with our goal of increasing net asset value per
share."
(1) Based on the technical report entitled "Diavik diamond mine, Northwest Territories, Canada, NI 43-101 technical report" that has an effective date of March 18, 2015.
(2) Refer to the 2017 technical report for the assumptions used in the calculation of the operating cash flow and net present value. The cash flow analysis, from which operating cash flow and net present value are derived, is solely for the purpose of demonstrating economic viability of the mineral reserve at the Diavik mine, and does not represent the business plans or cash flows of either participant of the Diavik joint venture.
(3) Comparable period for the previous estimate refers to years 2017 to 2023 in the 2015 technical report.
(4) Operating cash flow is defined, for the purpose of this discussion, as revenue less operating expenses and taxes.
Updated mineral reserves and resources
As compared with the mineral reserves in the 2015 technical report, the
mineral reserves in the 2017 technical report reflect exploration
success from the 2015 drilling campaign, as well as the mining
activities that took place in 2015 and 2016. Approximately 2.8 million
tonnes and 6.7 million carats were added to the year-end 2015 mineral
reserves at the A-154 North pipe, through the conversion of mineral
resources to mineral reserves. The current life-of-mine plan
incorporates this increase in mineral reserves at the A-154 North pipe.
In 2015, approximately 6.4 million carats were recovered, and in 2016,
approximately 6.7 million carats were recovered at the Diavik mine.
As of Dec. 31, 2016, the Diavik mine had 16.3 million tonnes of
proven and probable mineral reserves containing 46.0 million carats of
diamonds, compared with 18.7 million tonnes of proven and probable mineral
reserves containing 52.8 million carats as of Dec. 31, 2015. The
updated mineral reserves and mineral resources statement reflects a
decrease of 2.4 million tonnes containing approximately 6.8 million
carats, attributable almost entirely to depletion.
During 2016, the mineral resource and reserve models were updated based
on surveying in active mining areas, confirmation of orebody contacts
located by underground drilling and the results of new samples taken.
In addition, model grades were adjusted from the results of production
batches sole sourced from A-154 South and A-418 that were processed
separately through the plant. In anticipation of future production from
the A-21 pipe, additional drilling provided updated orebody geometry,
internal geology and grade estimation.
The attached mineral reserves and mineral resources tables summarize the mineral reserves and mineral resources at
the Diavik mine as at Dec. 31, 2016. Tonnes are reported as millions
of metric tonnes (Mt), diamond grades as carats per tonne (Cpt) and
contained diamond carats as millions of contained carats (Mct). The
mineral reserves account for depletion due to production and sampling to
the end of Dec. 31, 2016. The values shown are on a 100-per-cent basis for
the Diavik joint venture.
MINERAL RESERVES AS AT DEC. 31, 2016
(100-per-cent basis)
Pipe Proven Probable Proven and probable
Mineral reserve Mineral reserve Mineral reserve
Mt Cpt Mct Mt Cpt Mct Mt Cpt Mct
A-154 North 3.6 2.4 8.5 4.6 2.3 10.8 8.2 2.3 19.3
A-154 South 0.3 3.2 1.0 0.7 3.7 2.8 1.1 3.6 3.8
A-418 1.8 4.1 7.5 1.9 3.1 6.0 3.7 3.6 13.4
A-21 3.3 2.8 9.4 - - - 3.3 2.8 9.4
Stockpile 0.03 2.9 0.1 - - - 0.03 2.9 0.1
---- --- ---- --- --- ---- ---- --- ----
Totals 9.1 2.9 26.4 7.3 2.7 19.5 16.3 2.8 46.0
---- --- ---- --- --- ---- ---- --- ----
Note: Totals may not add up due to rounding.
The mineral reserves estimate reflects a bottom screen size of one millimetres.
Stockpiles are minor run-of-mine stockpiles that are maintained at or
near the process plant and are available to maintain blending of
kimberlite sources to the plant.
MINERAL RESOURCES (1) AS AT DEC. 31, 2016
(100-per-cent basis)
Pipe Measured Indicated Inferred
Mineral reserve Mineral reserve Mineral reserve
Mt Cpt Mct Mt Cpt Mct Mt Cpt Mct
A-154 North - - - - - - 0.5 2.3 1.1
A-154 South - - - - - - 0.4 2.8 1.2
A-418 - - - - - - 0.2 2.5 0.5
A-21 - - - 0.4 2.4 0.9 0.8 3.5 2.7
--- --- --- --- --- --- --- --- ---
Totals - - - 0.4 2.4 0.9 1.9 2.9 5.5
--- --- --- --- --- --- --- --- ---
Note: Totals may not add up due to rounding.
(1) Mineral resources are reported exclusive of
mineral reserves and represent material remaining
after mineral reserves have been removed for
reporting separately elsewhere.
The mineral resources estimate reflects a bottom screen size of one millimetre.
The mineral resources have reasonable potential to be mined but do not
have mining losses and/or dilution applied at this time, and as such,
they represent in situ values. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.
Updated reserves-only life-of-mine plan
The life-of-mine plan has been incorporated into the financial and
operating guidance for the fiscal year ending Jan. 31, 2018, as
released by the company on March 17, 2017. As such, there is no change
to the previously announced guidance for the company's 40-per-cent share of the
Diavik mine.
Production
Between 2017 and 2025, 46.0 million carats are forecast to be recovered
from the processing of 16.3 million tonnes of ore. Production will be
sourced from three existing pipes at A-154 South, A-154 North and A-418,
with production from the A-21 pipe, which is currently in development,
commencing in 2018. Production will cease from the A-154 South pipe in
2019, followed by the A-418 pipe in 2021 and the A-21 pipe in 2023, with
production from the A-154 North pipe continuing until the end of the
mine life in 2025. Production figures do not include rough diamond
stocks at the mine, or any rough diamond inventory currently available
for sale by the company. The attached tonnes processed and carats recovered tables show the planned tonnes
processed and carats recovered for each pipe.
TONNES PROCESSED
(millions) (100-per-cent basis)
Calendar year A-154 South A-154 North A-418 A-21 Total
2017 0.46 0.75 0.94 - 2.18 (1)
2018 0.36 0.83 0.91 0.21 2.30
2019 0.23 0.94 0.77 0.37 2.30
2020 - 0.95 0.75 0.60 2.30
2021 - 1.06 0.36 0.88 2.30
2022 - 1.13 - 1.17 2.30
2023 - 1.20 - 0.11 1.31
2024 - 1.23 - - 1.23
2025 - 0.12 - - 0.12
---- ---- ---- ---- -----
Total 1.05 8.20 3.74 3.32 16.34
---- ---- ---- ---- -----
Note: Totals may not add up due to rounding.
(1) Total ore processed in calendar 2017 includes 27,000 tonnes
of stockpile material containing an estimated 76,000 carats.
CARATS RECOVERED
(millions) (100-per-cent basis)
Calendar year A-154 South A-154 North A-418 A-21 Total
2017 1.60 1.74 4.18 - 7.60 (1)
2018 1.30 2.00 3.54 0.59 7.43
2019 0.85 2.24 2.69 1.17 6.95
2020 - 2.18 2.17 2.30 6.65
2021 - 2.47 0.85 2.47 5.78
2022 - 2.64 - 2.70 5.34
2023 - 2.87 - 0.21 3.08
2024 - 2.85 - - 2.85
2025 - 0.27 - - 0.27
---- ----- ----- ---- -----
Total 3.75 19.26 13.43 9.44 45.96
---- ----- ----- ---- -----
Note: Totals may not add up due to rounding.
(1) The total carats recovered in calendar 2017 include an estimated
76,000 carats from the processing of 27,000 tonnes of stockpile
material.
In addition to the current mineral reserves, there are 1.9 million
tonnes of inferred mineral resources, of which 1.1 million tonnes (in
the aggregate) are distributed among the lower portions of A-154 South,
A-154 North and A-418. The operator of the Diavik mine, DDMI, currently
expects to process this material as part of its mining operations as
they reach the lower levels of each pipe. However, inferred mineral
resources are considered too geologically speculative to have economic
considerations applied to them that would enable categorization as
mineral reserves, and there is no certainty that they will be mined.
Therefore, they have not been included in the above mine plan. Mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
The incremental 6.3 million carats recovered from 2017 to the end of the
mine life are forecast to be mined primarily from the A-154 North pipe,
which has the highest average carat value amongst the kimberlite pipes
at Diavik.
Diamond prices
Using the prices realized in the company's recent sales history, price
forecasts for the future A-21 pipe and the current diamond recovery
profile of the Diavik processing plant, the company has modelled the
approximate rough diamond price per carat for the kimberlite pipes at
the Diavik mine.
2016 average price per carat:
A-154 South: $126 (U.S.)
A-154 North: $166 (U.S.)
A-418: $90 (U.S.)
A-21: $126 (U.S.)
Capital and operating costs
Operating costs over the remaining life of the mine are forecast to
total approximately $2.8-billion. Given the remote location of the
Diavik mine, a large portion of the operating expenditure is fixed, with
the major cost items being human resources and fuel.
Development capital, which totals approximately $173-million, including
contingencies, relates to the development of the A-21 pipe that is
forecast to enter production in 2018. Sustaining capital over the life
of mine is forecast to total approximately $216-million.
CAPITAL AND OPERATING COSTS
($ millions) (100-per-cent basis)
Calendar year Development capital Sustaining capital Total capital Operating costs
2017 $95 $47 $142 $334
2018 64 42 106 348
2019 14 49 63 385
2020 - 36 36 374
2021 - 33 33 352
2022 - 6 6 331
2023 - 2 2 296
2024 - 2 2 276
2025 - - - 137
--- --- --- -----
Total 173 216 389 2,832
--- --- --- -----
Note: Totals may not add up due to rounding.
Excluded from capital and operating costs are marketing costs, royalties
payable to the government of the Northwest Territories, private
royalties and $165-million of estimated reclamation costs. The majority
of reclamation costs is expected to be incurred between 2024 and 2028.
Qualified person
The scientific and technical information contained in this press
release has been prepared by Diavik Diamond Mines (2012), operator
of the Diavik diamond mine, under the supervision of Calvin Yip, PEng, principal adviser, strategic planning, of Diavik Diamond Mines
(2012), a qualified person within the meaning of National
Instrument 43-101 of the Canadian Securities Administrators.
About Dominion Diamond Corp.
Dominion Diamond is a Canadian diamond mining company
with ownership interests in two major producing diamond mines. Both
mines are located in the low-political-risk environment of the Northwest
Territories in Canada. The company operates the Ekati diamond mine, in
which it owns a controlling interest, and also owns 40 per cent of the Diavik
diamond mine. It supplies premium rough diamond assortments to the
global market through its sorting and selling operations in Canada,
Belgium and India.
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